Illustration 15 KP manufactures a range of goods which it sells to wholesale customers only from its head office. In addition, the Ho transfers goods to a newly opened branch at factory cost plus 15%. The branch then sells these goods to the general public on only cash basis. The selling price to wholesale customers is designed to give a factory profit which amounts to 30% of the sales value. The selling price to the general public is designed to give a gross margin (l.e., selling price less cost of goods from H.O.) of 30% of the sales value. KP operates from rented premises and eases all other types of fixed assets. The rent and hire charges for these are included in the overhead costs shown in the trial balances 57 From the information given below, you are required to prepare for the year ended 31st Dec 2012 in columnar form (a) A Profit & Loss account for (0) H.O. (W) the branch (!) the entire business. (b) Balance Sheet as on 31st Dec, 2012 for the entire business. H.O. Branch Raw materials purchased 35,000 Direct wages 1,08,500 Factory overheads 39,000 Stock on 1-1-2012 Raw materials 1,800 Finished goods 13,000 9.200 Debtors 37,000 Cash 22.000 1,000 Administrative Salaries 13.900 4.000 Salesmen's Salaries 22,500 6,200 Other administrative & selling overheads 12 500 2,300 Inter-unit accounts 5,000 2.000 Capital 50,000 Sundry Creditors 13.000 Provision for unrealized profit in stock 1.200 Sales 2.00.000 65,200 Goods sent to Branch 46.000 Goods received from H.O. 44,500 3.10.200 3.10.200 67,200 67,200 Notes: (1) On 28th Dec, 2012 the branch remitted 1,500 to the H.O. and this has not yet been recorded in the H.O. books. Also on the same date, the H.O dispatched goods to the branch invoiced af 1,500 and these too have not yet been entered into the branch books. It is the company's policy to adjust items in transit in the books of the recipient (2) The stock of raw materials held at the H.O. on 31st Dec, 2012 was valued at 2.300 (3) You are advised that: there were no stock losses incurred at the H.O. or at the branch it is KP's practice to value finished goods stock at the H.O. at factory cost there were no opening or closing stock of work-in-progress